Shale gas economic effect continues to expand in Pennsylvania

By Tim Stuhldreher,
September 28, 2012 at 3:00 AM

A Chevrolet Camaro that runs on natural gas was on display Sept. 20 in the exhibition hall of the Philadelphia Convention Center as part of the Shale Gas Insight 2012 convention sponsored by the Marcellus Shale Coalition. Photo/Tim Stuhldreher

Pennsylvania's governor could not have made his views on shale gas any clearer.

"I am convinced we are at the beginning of a new industrial revolution," Gov. Tom Corbett told the audience last week at the second annual Shale Gas Insight convention in Philadelphia. "And you are the tip of the spear."

Pennsylvania squandered its first energy revolution, the oil boom of the late 1800s, through lack of planning, but it will not squander this one, the governor promised.

Over the past five years, the shale gas industry has invested invest billions of dollars in the Marcellus Shale region, enough money to build 73 Comcast Centers, the tallest building in Philadelphia, said Frank Semple, CEO of Mark West Energy Partners.

The industry has been making such pronouncements consistently as it has ramped up over the past several years.

The difference this year: A noticeable shift from predictions to actualities.

Natural-gas production is at record levels and climbing higher. Millions of dollars' worth of infrastructure is being built. Fundamental changes are under way in the nation's energy profile.

Natural-gas prices have dropped by 43 percent in the past year and have helped drive a 40-percent drop in electricity prices, enormously benefiting Pennsylvania businesses and consumers, said C. Alan Walker, secretary of the state Department of Community and Economic Development.

Low prices "have allowed consumers to really understand first-hand the benefits" of shale gas development, said Kathryn Klaber, president of the Marcellus Shale Coalition, the event's organizer and sponsor.

Drilling companies are creating jobs for supply-chain firms across the commonwealth, Corbett said. Moreover, the industry "has added $200 million to the common good" through the state's new impact fee, he said, though some critics continue to call the fees too low.

Eurofins Lancaster Laboratories in Upper Leacock Township does water testing for the industry and has seen that component of its business grow "upward of 30 percent," said Erik Fredericksen, operations manager in the wet chemistry department, who was manning Lancaster Labs' booth at the convention's exhibition hall.

Bony Dawood, president of Hampden Township-based Dawood Engineering Inc., said the atmosphere at the convention "is typical of what we're seeing" in the industry: "A lot of optimism, a lot of excitement."

The company is projecting 30 percent growth this year thanks to the Marcellus, Dawood said. Staff has increased by more than 50 percent and Dawood has opened new offices in Sayre and in Canton, Ohio.

In the Philadelphia area, optimism about shale helped save one refinery, the former Sunoco complex acquired by the Carlyle Group private equity firm, and is expected to save two more, Corbett said.

Keeping the refineries in business offers midstate companies supply-chain opportunities and will help keep energy prices low here, Krancer said.

In addition, there is a possibility the Philadelphia Energy Solutions refinery could add the capacity to produce fertilizer, which would benefit midstate farmers, Krancer said.

In western Pennsylvania, Shelltentatively plans to locate an ethane "cracker" — a massive processing plant for converting natural gas into chemical industry feedstock — on industrial land north of Pittsburgh. The state is in talks with other major companies about similar projects, DCED Secretary Walker said.

He called the Shell project a "guinea pig" of sorts, saying that when it proves successful, other companies will follow.

Building a $3.2 billion cracker in Pennsylvania would bring 2,400 direct jobs and 17,000 indirect jobs to the state and would add $4.8 billion a year to the state's economic output, said Martha Gilchrist Moore, senior director of policy analysis and economics for the American Chemistry Council.

Shale gas changes North America from a high-cost producer to "incredibly competitive" in the chemical industry, Gilchrist Moore said. A decade ago, if she had said it made sense to build a cracker in the region, "I would have been laughed off the stage," she said.

For Walker and Corbett, natural gas has the potential to restore Pennsylvania's place as the "energy capital of the world."

The gas industry and its supply chain could eventually end up supporting 500,000 jobs, or 10 percent of Pennsylvania's workforce, Walker said.

In the 1920s, Pennsylvania accounted for 25 percent of world energy production and was the world's fourth largest economy, Walker said.